Part one of a three-part series
Governor Gavin Newsom signed two sweeping budget trailer bills, Assembly Bill 130 (AB 130) and Senate Bill 131 (SB 131), into law on June 30, 2025, enacting meaningful changes to the California Environmental Quality Act (CEQA) intended to boost the delivery of housing and curb CEQA litigation abuse. Borrowing language from housing bills proposed by Assemblymember Buffy Wicks and Senator Scott Wiener—AB 609 and SB 607, respectively—the budget bills aim to accelerate production of housing within and outside urban areas.
In this three-part series, we provide a roadmap to the provisions of the budget bills that offer:
- relief for infill housing and housing projects that would have limited or no environmental impacts;
- projects that result in potentially significant vehicles miles traveled (VMT); and
- CEQA litigation reform.
This issue focuses on infill and housing projects with no or limited environmental impacts.
Effective immediately, the budget bills create three new streamlining tools for housing developers: (1) an expanded residential infill exemption; (2) streamlined CEQA review for projects that narrowly miss qualifying for exemptions; and (3) a CEQA exemption for zoning actions specified in the schedule of actions in an adopted Housing Element.
AB 130 also offers eligible residential and mixed-use projects a means to leverage state subsidies for public infrastructure projects through a Transit-Oriented Development Implementation Fund. This topic will be covered in our next issue.
Beyond CEQA, the budget bills also introduce updates to cornerstone State housing laws, including the Housing Accountability Act and Permit Streamlining Act, and relief from energy efficiency and other building standard code updates for residential projects.
Expanding the CEQA Residential Infill Exemption
AB 130 introduces a new infill exemption that builds on the existing Class 32 categorical infill exemption (Class 32 Exemption), offering broader eligibility and fewer barriers for qualifying projects. The Infill Exemption in AB 130 covers "residential development projects" as defined under the HAA.
To qualify for the Infill Exemption, the Project must meet the following criteria:
- 20 Acre Maximum – The project site must be less than 20 acres and previously developed or substantially surrounded by urban uses, as defined by statute. This is an improvement over the Class 32 Exemption's 5-acre maximum.
- Located in Urban Area – The project must be located in an urban area or within the boundaries of an incorporated municipality.
- Consistency with General Plan & Zoning – The project must be consistent with the applicable general plan and zoning ordinance and any applicable local coastal program. If the general plan and zoning are not consistent (e.g., due to a recent general plan change), then the project only needs to be consistent with one (either general plan or zoning). This language is an improvement over ambiguities in the Class 32 Exemption over how to treat inconsistencies between the general plan and zoning resulting from State-enforced general plan housing element update requirements.
- No Environmentally Sensitive Areas – Adopting language of a prior statutory exemption for housing, the project cannot be located in any environmentally sensitive areas such as certain coastal areas, farmland or properties in fire hazard severity zones (subject to exceptions).
- Minimum Density Requirements – The project must meet minimum density requirements, which range from 10 dwelling units per acre (du/ac) for unincorporated areas in nonmetropolitan counties to 30 du/ac for sites in a jurisdiction within a metropolitan county.
- Requirements for Projects Near Freeways – If the project is located within 500 feet of freeway, it must meet certain air filtration heating, ventilation and air conditioning requirements and cannot have balconies facing the freeway.
- No Hospitality Uses – The project cannot include any hospitality uses such as a hotel, motel or bed and breakfast, or propose the demolition of historic structures.
- Phase I Environmental Site Assessment Required – As a condition of approval, the project must complete a Phase I Environmental Site Assessment.
Local agencies processing projects under the new statutory Infill Exemption must comply with new approval deadlines. Under the Infill Exemption, project approval or denial must occur within either 104 days or 164 days after the application is deemed complete, depending on the applicable inter-governmental consultation process with California Native American tribes. In this way, the new Infill Exemption is the first to offer a definite processing timeline for qualifying projects.
Another key advantage of the new statutory Infill Exemption, relative to its predecessor regulatory exemption for infill housing, is that it is not subject to the "unusual circumstances" exception found in CEQA-implementing regulations. That exception disqualifies infill projects from streamlined CEQA review if there is a reasonable possibility that an activity would have a significant environmental effect due to unusual circumstances.
Streamlined Review for Projects That Are Narrowly Disqualified From Exemptions
To qualify for streamlining under a statutory or categorical CEQA exemption, a project must satisfy a detailed set of conditions specific to each exemption. These requirements can be extensive, and failing to meet even one condition disqualifies the project from the exemption entirely, triggering the need for CEQA review and the associated risk of arguments that an Environmental Impact Report (EIR) is required for the project. The expense and delay associated with EIR preparation is a significant hurdle to project delivery.
SB 131 offers a streamlined solution for these "narrow misses." Under SB 131, if a project fails to qualify for a statutory or a categorical exemption due to just one unmet condition, then CEQA review is limited to that single, non-qualifying condition and does not have to address any other resources areas or project elements otherwise required to be covered in an EIR. The analysis of these potential effects can occur through a Negative Declaration or Mitigated Negative Declaration, or EIR, as appropriate under CEQA. If the CEQA lead agency determines that an EIR is required, the alternatives analysis section of an EIR under this streamlined review process does not have to include any discussion of alternatives to the housing development project or its growth inducing effects. The streamlined review does not apply to projects located on "natural and protected lands," as defined in this bill.
CEQA Exemption for Schedule of Zoning Actions in an Approved Housing Element
AB 131 exempts from CEQA rezoning that implements the schedule of actions contained in an approved general plan housing element. This provision has the potential to facilitate the delivery of new housing throughout the state. However, because the exemption is tied to the adoption of a housing element identifying the specific rezoning, it is unlikely to benefit projects that are currently in the pipeline and that are not identified in an approved housing element. The effects of this provision would be felt within the next five to six years, when cities and counties next update their housing elements pursuant to state law. The exemption excludes any natural and protected lands, as defined in the bill, that may be located on the subject parcels and provides that the rezoning of such lands is a separate project under CEQA. The exemption also excludes a rezoning that would allow for the construction of a distribution center or for oil and gas infrastructure.
Other Relevant Changes:
- Urban Infill Eligibility Map – The new legislation directs the Governor's Office of Climate Innovation to by 2027, map the eligible urban infill sites within every urbanized area throughout the state.
- Building Code Update Freeze – In an uncodified section of AB 130, the Legislature has stated its intent to pause updates to building standards for residential projects for six years in order to "bring more certainty to the home construction industry." Other provisions of the bill also limit updates to local building code standards. The limitation does not apply to code updates requiring home hardening requirements.
- Repeals Permit Streamlining Act Sunset Date – The Permit Streamlining Act, which provides certain timelines for processing development project applications applicable to local and most state agencies, previously had a sunset date of 2034. This sunset date has now been removed from the Act.
- Removes Sunset Date for Housing Accountability Act Provisions – The bill removes the sunset dates previously in place for Housing Accountability Act's five hearing maximum limit; time limit for a project site's historical qualification; and residential unit replacement requirements.
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